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The Washington Post reports that “state governments have become an unlikely ally of the banking industry in a fight against putting limits on the fees that credit and debit card issuers can charge to retailers.

“Treasurers from at least eight states are considering sending a letter to lawmakers this week over concerns that proposed limits on the fees card issuers charge for processing purchases could endanger state programs that use prepaid cards to dispense crucial benefits such as unemployment insurance. The limits are included in an amendment to the overhaul of financial regulations that passed the Senate last month.”

The amendment, which is included in a US Senate financial reform bill but not in the version passed by the House of Representatives, “ allows retailers to give customers discounts for paying with cash and to set price thresholds for accepting cards,” the Post writes. “It also tasks the Federal Reserve with determining whether swipe fees for debit cards are ‘reasonable and proportional’ -- the provision that most troubles the banking industry. Typically, the fees range from 1 to 2 percent of the purchase price, and retailers argue that the amount can wipe out their profit on small sales.”

The two versions of the bill have gone to a conference committee that is charged with coming up with a single version that would have to be approved by both house of the US Congress before going to President Obama’s desk for his signature.

According to the Post story, critics of the amendment argue “that the amendment could result in retailers turning away customers who use government prepaid cards for small purchases, such as a gallon of milk, because they do not meet the minimum spending requirements. Those people would then be required to buy additional items to hit the threshold or use another form of payment.”
KC's View:
It seems pretty clear that the banks will do anything and everything to stop this amendment from going through; expect them to suggest that the bill will result in “death panels” if they get even a hint that it might scare people into opposing financial reform at this level.

It may be that some changes will need to be made in order to protect the people who get government benefits in the form of prepaid cards. But it seems to me that these kinds of alterations are preferable to scrapping “swipe fee” reform, which would be a real mistake.

BTW ... it is worth noting that representatives from NACS and Speedway SuperAmerica will host a telephonic press conference at 10:00 am EDT on Thursday to announce a new set of nearly 1.7 million customer petitions asking Congress to enact swipe fee reform to benefit merchants and consumers.

The 1.68 million signatures collected by Speedway SuperAmerica’s convenience stores in Indiana, Illinois, Kentucky, Michigan, Minnesota, Ohio, South Dakota, West Virginia and Wisconsin bring the total number of swipe fee petition signatures gathered at convenience stores across the country to 5.5 million.

That’s political muscle to which attention must be paid.